Canada Eliminates Digital Services Tax to Boost US Trade Relations

Canada has announced it will withdraw its planned digital services tax (DST) on large U.S. technology firms just hours before payment collection was set to begin. This decision is intended to reopen trade negotiations with the United States, which had stalled after U.S. President Donald Trump criticized the tax as a “blatant attack” and threatened retaliatory tariffs.

The DST proposed a 3% levy on Canadian revenues exceeding $20 million from major tech companies like Amazon, Google, Meta, and Apple. It was projected to earn over C$2 billion in the first year by applying the tax retroactively from January 2022 and was expected to raise nearly C$6 billion over five years.

Canada’s Finance Minister François-Philippe Champagne confirmed the tax will be removed and no payments will be collected. He emphasized that Canada had always preferred a global solution to taxing digital services, but introduced the DST in 2020 to address the lack of taxation on tech companies operating within Canada.

U.S. officials welcomed the decision. White House economic adviser Kevin Hassett confirmed talks would resume, while Commerce Secretary Howard Lutnick called the tax a “deal breaker” for any trade agreement. Business leaders on both sides praised Canada’s move, saying it will help strengthen economic ties.

Roughly 75% of Canada’s exports, worth over $400 billion annually, go to the U.S., compared to only 17% of U.S. exports going to Canada. The scrapped tax had caused tension in bilateral relations, which had shown signs of improvement after months of strained diplomacy.

Critics say the Canadian government mishandled the DST, citing poor timing, retroactive application, and ignoring U.S. bipartisan concerns. Domestic opposition also arose, with businesses warning the costs would be passed on to consumers.

Canada,Digital Services Tax,Trade Negotiations,US Tech Companies,François-Philippe Champagne